electronic fraud

Your school age daughter calls you at work and asks you to bring home a red pencil she needs for her homework.

Q1: You find a red pencil in your company’s supply closet. Would you take it home or would you consider that cheating?

Q2: You can’t find any red pencils in the office but you know you can buy one for a quarter at the office supply store around the corner. You don’t have a quarter but you can find one in the petty cash drawer by the coffee machine. Would you take a quarter and buy your daughter a red pencil or would you consider that cheating?

If you’re like Dan Ariely or me or most people, you think it’s OK to take a pencil from the supply closet but you would never take a quarter from the petty cash drawer.

The value involved is the same in both cases, so why do we think one scenario is OK and the other is not? According to Ariely, it’s about cash. We tend not to cheat when cash is involved. We know it’s wrong to take money. We can’t rationalize the action to ourselves.

The farther we get from cash, however, the easier it is to rationalize cheating. Most of us wouldn’t steal money from a stranger. But we might shade things a bit on our tax returns and we don’t feel too badly about inflating our losses on insurance claims. Ariely concludes that, “When we look at the world around us, much of the dishonesty we see involves cheating that is one step removed from cash.”

So does this mean that corruption is about to skyrocket in Sweden?

For the past several decades, Sweden has been moving toward a cashless society. Banks began charging for checks about 30 years ago. Rather than writing checks, people found it easier and less expensive to transfer money from one account to another, initially by fax, then online, and now by mobile devices like smartphones. ATMs are being phased out. By one estimate, only 900 of the 1,600 branch banks in the country even bother to keep cash on hand.

So how do Swedes pay for things? With blips and chips. You can pay the parking meter with your smart phone. You can transfer money from one account to another with an app called Swish. You can give money to a beggar by swiping a card or tapping a phone. Even Swedish churches use apps instead of collection plates.

The Swedish transition to a cashless society accelerated in September 2009, after the Västberga heist. Thieves in a stolen helicopter smashed through the skylight of a bank-processing center and made off with about $6.5 million in cash. The heist has been romanticized endlessly in Sweden. But its biggest impact was to erode trust in cash. If cash could be stolen so easily – and it was never recovered – why bother with cash? (I happened to walk by the Västberga center, on my way to work, about half an hour before the attack. Yikes!)

In addition to theft, cash is involved with a whole host of nefarious activities – ranging from drugs to weapons to prostitution to payments to illegal aliens. So why not do away with it? Dan Ariely’s data may give us pause – the farther we get from cash, the more likely we are to cheat.

So is Sweden growing more corrupt? At least one estimate suggests, “…cases of electronic fraud have more than doubled in the past decade….” Before giving up cash altogether, the Swedish government should take some baseline measures of corruption and cheating and then monitor them over time. It may turn out that going cashless is much more expensive than the occasional bank heist.